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DOL Urged to Expand Electronic Disclosures by Benefit Plans

Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.

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The ERISA Industry Committee (ERIC) submitted a
comment letter urging the U.S. Department of Labor (DOL) to expand its safe harbor for electronic disclosure for employee retirement and other benefit plans, arguing that the current standard is too restrictive.

ERIC’s comments, submitted on June 3, 2011, are in response to
a DOL request for information to explore whether to expand the current disclosure standards, taking into account current technology, best practices, and the need to protect the rights and interests of participants and beneficiaries.

The last formal adoption of electronic disclosure by DOL was in 2002 under section 404(c) of the Employee Retirement Income Security Act (ERISA), which only allowed the use of electronic disclosure if the employer's electronic system was an integral part of the employee's duties or the participant has affirmatively consented to electronic delivery.

ERIC argued that the number of people who have access to the Internet and electronic communications has grown exponentially in the last decade, and that DOL’s existing safe harbor is too restrictive, particularly the requirement to obtain affirmative consent unless access to the applicable electronic medium is an “integral part” of the employee’s duties.

“We recognize that not everyone has Internet access and that some people prefer to receive paper in the mail. However, we do not believe these facts justify the burdens of the existing consent requirements,” said ERIC President Mark Ugoretz. In a separate statement, Ugoretz noted that “The way people receive information is changing daily. In many instances, if we do not make electronic access the default, the growing number of people who ignore paper in favor of electronic access will be left out of the loop, the very thing the paper advocates are concerned about.”

ERIC offered a detailed proposal to expand the safe harbor that would provide electronic disclosure as the default from which participants could opt out. ERIC said its proposal would provide sufficient protection for individuals who don't wish, or are not able, to receive communications electronically.

ERIC also urged the DOL to adopt Treasury’s “effective ability to access” standard published in 2006, noting that a paper opt-out notice should not be required for anyone who has access to the applicable electronic medium. "The fact that some individuals still prefer paper does not justify defaulting everyone to paper," ERIC argued. “In short, most employees today have access to electronic media through countless devices, and they use electronic media even if access to electronic media is not an integral part of their duties,” Ugoretz said.

Finally, ERIC urged coordination among the departments of Labor and Treasury, and the Securities and Exchange Commission to develop a single disclosure standard that would benefit plan sponsors, participants and beneficiaries. A single set of rules would reduce the incidence of inadvertent noncompliance and ease the burden of learning and implementing multiple sets of rules, the letter said.

ASPPA Weighs In

Along similar lines, the American Society of Pension Professionals & Actuaries (ASPPA) responded to the DOL's request for information by urging the department "to modify electronic disclosure regulations to facilitate electronic communication. Specifically, we suggest the consent and access requirements of the existing ‘safe harbor’ be revised to allow electronic disclosure as the default communication method."

According to the group's June 6, 2011 comment letter, signed by Craig
P. Hoffman, general counsel and director of regulatory affairs at ASPPA, "Support for this electronic delivery was confirmed by the overwhelming response DOL received on their website created to capture public input on these issues." Hoffman added, "Electronic disclosure offers participants flexibility and many user friendly benefits—including the ability to layer and scale the amount of data for review, remote access through cloud-based computing, improved access for the visually impaired and others with disabilities, in addition to multiple storage options."

Because electronic delivery may not work for all participants, however, ASPPA also "suggests an ‘opt out’ feature for those who wish to receive paper disclosures from their retirement plan," Hoffman said.

Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.